How the Rise of the Post Office Explains American Innovation

February 3, 2016

Wherever government extends its tentacles, innovation follows. To some contemporary technologists, that might sound like a joke without a punch line. But it’s a reasonable description of 19th century America, according to a new working paper by Daron Acemoglu of MIT, James Robinson of the University of Chicago, and Jacob Moscona of Harvard.

The 1800s set the stage for America’s technological dominance and, as the researchers document, in that era invention and government expansion went hand in hand.  The paper presents a novel dataset for measuring government expansion. “The 19th-century U.S. state quickly started forming a huge web connecting the country,” the authors write. “At the center of this web was the post office, created by the Post Office Act of 1792, which soon became the single most important government employer in the first half of the 19th century… The New York Times in 1852 described it as the mighty arm of civil government.”  Read more.


This week in history: The Post Office and the Constitution

September 25, 2011

Remember a time before envelopes when you just folded the sheets of your letter, added a touch of sealing wax, and dropped it off at the post office?  Remember when there were no stamps, and it was the person at the receiving end who paid the postage?  Remember when the cost for mailing a letter depended on how far it was going, when there were even posts along the post roads to mark distances, and when it could take several weeks for a letter to go from Philadelphia to Boston?  Remember when almost every post office was a "village post office" — a counter in a general store or tavern where some postal business could be conducted?

Ah, the good old days.  The really good old days — the Post Office of the 18th century.  

This is an important week in US postal history.  It was on September 22, 1789, that the newly formed Federal Government established the Post Office and authorized the appointment of a postmaster general.  A few days later, on September 26, the nation’s first postmaster general took office.   And it wasn’t Ben Franklin.  His name was Samuel Osgood.

Franklin is rightly known as the country’s first postmaster general, but that was before 1776 and the formation of the federal government.  There had been a postal system in the country since colonial days, but it suffered from inefficiency and deficits, at least until Franklin came along.  In his service to the English crown as postmaster general for over two decades, Frankln improved service and put the system in the black for the first time.

Despite his achievements, Franklin was dismissed from his post in 1774 because of his involvement with revolutionaries.  A year later, the Continental Congress established the Post Office and appointed him the country’s first postmaster general.  So we really have two "first" postmaster generals — Franklin before the Revolutionary War, and Osgood under the Constitution.  How the Post Office ended up in the Constitution is another story.

During the Revolutionary War, military leaders and elected officials could see that a robust postal system was crucial to facilitating communication and coordinating their wartime efforts.  Postal workers were even exempted from military service.  In 1778, the Founding Fathers wrote into the Articles of Confederation a clause granting the United States Congress the “sole and exclusive right and power of . . . establishing and regulating post offices from one state to another, throughout all the United States.”  The clause also empowered the post offices to charge postage “to defray the costs” of running the system. 

Over the next few years, the value of the postal system to the young democracy became even more apparent.  The Post Office truly was "binding the country together."  The Post Office helped elected representatives and their constituents keep in contact, and through its distribution of newspapers, it enabled Americans to stay informed about political issues.  Delivering newspapers was so important, in fact, that James Madison and Thomas Jefferson advocated reduced rates or even free delivery.  Madison also believed that “by providing the citizenry with the means to monitor its elected representatives, the postal system could help to check the abuse of power” (Christopher Shaw, Preserving the People's Post Office).

In 1789, the “postal clause” of the U.S. Constitution —  Article 1, section 8 — gave the Congress power over the Post Office.  The passage states that the Congress “shall have the power . . . to establish Post Offices and Post Roads.”  The clause was a subject of controversy from the very beginning, and three years later, when Congress debated the Post Office Act of 1792, it was about whether or not Congress could and should delegate to the postmaster general its power to establish post offices and post roads.  The Senate wanted to give that role to the postmaster general, but the House said no, the Congress should retain its power.  

The Postal Service Means Business

August 28, 2011

"History Repeats Itself: The Robber Barons of the Middle Ages and the Robber Barons of Today"

“The Postal Service has been faced with critical financial problems 
in recent years.”  In the last fiscal year, “Postal Service expenses exceeded revenues” by billions of dollars.  “Although postage rates have increased significantly, labor and fuel costs have risen even faster. . .   Rising payroll costs have been primarily responsible for this situation.”

 “Because of such serious 
financial problems and the need to economize wherever possible,” the General Accounting Office (GAO) has conducted a review “to reassess the pros 
and cons of closing small post offices.”  The Postal Service has also said “that it would be helpful if the [Postal Reorganization] act were amended to specifically authorize the Service to close small offices if the alternative mail service would be at least as good.”

Sound familiar?  It should.  It’s about all we’ve been hearing for the past few months, and it’s become the mantra of the Postmaster General, the USPS managers trying to explain to communities why their post office is going to close, and legislators looking to make it easier to close post offices.

The thing is, all those quotations are not from today’s news.  They come from a GAO report prepared by the Comptroller General in the year 1975

The urgent push to close post offices to prevent the Postal Service from going bankrupt is nothing new.  The Postal Service is simply using the latest deficit “crisis” — an accounting problem caused primarily by the over-funding of retirement benefits and a slump in commercial mail caused by the recession — to do something some people have wanted to do for decades.

The 1975 report is called “$100 Million Could Be Saved Annually In Postal Operations In Rural America Without Affecting The Quality Of Service.”  The opening sentence reads: “The Postal Service has been faced with critical financial problems 
in recent years. In fiscal year 1974, expenses exceeded revenues by about $2.3 billion.”  The report’s recommendation?  Close 12,000 small rural post offices and save $100 million.

The parallels between the 1975 report and our current situation are even more striking if you figure for inflation and convert those 1975 numbers to 2011 dollars.  The 1974 deficit of $2.3 billion would come to $9.7 billion in today’s dollars — over a billion dollars more than the $8.5 billion the Postal Service lost in fiscal year 2010.  Yet somehow the Postal Service survived without closing all those post offices.

Similarly, in both 1975 and 2011, the estimated savings that would have come from closing thousands of post offices is minute.  In 1975, closing 12,000 post offices would have saved $100 million — less than 4% of the deficit.  In 2011, closing the 3,652 post offices of the Postal Service’s Retail Access Optimization initiative might save $200 million — 2.3% of the 2010 deficit.

There are still more parallels.  In June 1975, when the report came out, the country was just coming out of a recession that had been caused by the quadrupling of oil prices by OPEC (hence the refernce to the rise in fuel prices as one cause of the Postal Service deficit) and by the 1973-74 stock market crash.  The recession had caused a dramatic drop in mail volume, and there were concerns that the volume might never return.  

There were also fears, as the GAO said in a second report in 1976, that "electronic funds transfer is increasing in usage and the use of computer terminals for direct exchange of information is on the upswing," both of which "might affect demand for traditional postal services."  How many times over the past year have we heard the same thing said about online bill paying and email causing a permanent "electronic divergence" from the mail?

One last parallel: The 1975 GAO report suggests that one way to "remedy" the loss of a post office for a community would be to set up a "contractor-operated community post office" (CPO) or a "rural branch . . . operated under contract by persons who are not postal employees."  Maybe this is where Postmaster General Donahoe got the concept for replacing thousands of rural post offices with contractor-operated "Village Post Offices" (VPO).

So why is history repeating itself this way?  Why is the Postal Service still trying to close post offices? 

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